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Trade openness and economic growth: further evidence without relying on data stationarity

Trade openness and economic growth: further evidence without relying on data stationarity Purpose – The purpose of this paper is to investigate the relationship between trade openness and economic growth in developing countries. Under this aim, the co‐integration relationship between trade openness and economic growth of 17 developing countries is examined without relying on data stationarity. Design/methodology/approach – The co‐integration relationship between trade openness and economic growth is analyzed by Bounds testing approach developed by Pesaran et al. In addition to this, the causality relationship is tested by causality analysis developed by Toda and Yamamoto. Findings – According to the Bounds test results, co‐integration relationship has been detected for six countries and long‐term coefficients among the variables have been found positive and statistically significant. According to the Toda and Yamamoto causality analysis, causality has been detected for eight countries. In four of these, the direction of causality is from trade openness to economic growth and in the other four, vice versa. Originality/value – The methodology employed provides an alternative framework for examining relationship among economic variables. The paper shows how to create co‐integration and causality tests without relying on data stationarity, which is a major problem in time series of economic variables. On the empirical side, it adds new empirical results into the literature in the name of identification of relationship between trade openness and economic growth in developing countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Commerce and Management Emerald Publishing

Trade openness and economic growth: further evidence without relying on data stationarity

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References (40)

Publisher
Emerald Publishing
Copyright
Copyright © 2012 Emerald Group Publishing Limited. All rights reserved.
ISSN
1056-9219
DOI
10.1108/10569211211204492
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to investigate the relationship between trade openness and economic growth in developing countries. Under this aim, the co‐integration relationship between trade openness and economic growth of 17 developing countries is examined without relying on data stationarity. Design/methodology/approach – The co‐integration relationship between trade openness and economic growth is analyzed by Bounds testing approach developed by Pesaran et al. In addition to this, the causality relationship is tested by causality analysis developed by Toda and Yamamoto. Findings – According to the Bounds test results, co‐integration relationship has been detected for six countries and long‐term coefficients among the variables have been found positive and statistically significant. According to the Toda and Yamamoto causality analysis, causality has been detected for eight countries. In four of these, the direction of causality is from trade openness to economic growth and in the other four, vice versa. Originality/value – The methodology employed provides an alternative framework for examining relationship among economic variables. The paper shows how to create co‐integration and causality tests without relying on data stationarity, which is a major problem in time series of economic variables. On the empirical side, it adds new empirical results into the literature in the name of identification of relationship between trade openness and economic growth in developing countries.

Journal

International Journal of Commerce and Management – Emerald Publishing

Published: Mar 9, 2012

Keywords: Developing countries; Economic growth; International trade; Econometrics; Data stationarity

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